Home Audio Transcription Let’s Talk Sports: Real Madrid, L.A. Rams, And Austin FC Stadium Financings...

Let’s Talk Sports: Real Madrid, L.A. Rams, And Austin FC Stadium Financings (Part 1) (Podcast) – Financial Services


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In this two-part episode of Let’s Talk Lending, Winston
& Strawn Partner Alan Hoffman is joined by guest speaker Zach
Effron, an Executive Director at JPMorgan focused on global stadium
and arena financings.

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The episode focuses on the following topics:

  • Breakdown of the structures for the L.A. Rams, Real Madrid, and
    Austin FC stadiums that Winston and JPMorgan worked on

  • The different types of revenue streams that are typically
    monetized at stadiums

  • The role of the local city government in a stadium financing

  • How stadium financing technology has been applied to stadia in
    foreign countries

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Audio Transcript

Alan Hoffman: Welcome to Winston &
Strawn’s Let’s Talk Lending podcast. My name is Alan
Hoffman and I Co-Chair the Project Finance group at Winston &
Strawn, and I also head the firm’s Arena and Stadium Finance
Practice. Winston is recognized as one of the leading law firms in
sports finance. And as part of my practice, I have closed
transactions in the arena and stadium finance space for teams in
Major League Baseball, the NFL, the NBA, National Hockey League,
Major League Soccer, for premier soccer clubs in Europe, for minor
league baseball teams, for the Tennis Center at Flushing Meadows
where the U.S. Open has played, and for various NCAA facilities as

We are fortunate to be joined today by another leader in the
industry, Zach Effron, an Executive Director in J.P. Morgan’s
investment bank, where Zach is responsible for the firm’s
global stadium and arena finance practice. Zach brings two decades
at least of experience having raised tens of billions in capital
for clubs across all the major leagues in North America, as well as
for various football clubs and soccer clubs throughout Europe.
He’s structured a broad range of financings, both recourse and
non-recourse at the team level and for affiliates of the team,
whether they be a stadium company or arena company.

As one recent example, Zach and I worked together on the new
football stadium for the Los Angeles Rams, which is not only an
incredible building from an aesthetic standpoint, but an
unbelievable site to watch a football game, and people probably
noticed that when they watched the Super Bowl this year. So welcome
Zach, and thanks very much for making yourself available today.

Zach Effron: Great. Well, thank you so
much to Alan and Winston & Strawn for having me this afternoon.
Happy to be here to chat with you on one of our favorite

Alan Hoffman: Zach, maybe we begin with a
bit of name dropping, which I wouldn’t normally do, but I think
it does help to reinforce just the scope of J.P. Morgan’s
practice in this sector. So I was wondering if you could maybe
describe or reference several of the stadium deals, arena
financings that we’ve worked on together.

Zach Effron: Sure, I’m happy to. Might
as well talk about what you started with SoFi Stadium, one of the
most recent transactions that we’ve been fortunate to be a part
of and always looking to push the market as far as we can and
deliver the best results for our client. It was the largest stadium
financing ever completed. It started at $2.25 billion during the
construction phase and ended up at $2.75 billion through the
refinancing. It was refinanced through a combination of long term
debt, the U.S. private placement that went out 35 years. So the
longest stadium financing that’s ever been put out into the
market, as well as a bank loan of $1.1 billion of which J.P. Morgan
has half of it on their balance sheet. So it was a great project
for our clients, Stan Kroenke for the NFL with their new West Coast
headquarters, and really couldn’t have ended up much better for
the LA Rams winning the Super Bowl there this year.

A very large and exciting transaction to be a part of and really
provides the next level of where stadiums and arenas are looking to
go to, at which leads into another project that Alan and I have
worked on over the last several years, the remodeling of the
Santiago Bernabéu for Real Madrid, one of the largest
football teams in the world. It was so interesting getting to know
this client and Alan was part of this where they said, we’ve
got one of the largest and strongest brands in the world. We’re
one of the most successful football teams in the world and how do
we continue to take this club and this fan base to the next level?
And a lot of it came with them, looking at how we operate and run
our stadiums here in the U.S., whether it was AT&T where
Cowboys are or really SoFi and they said, “We need to be doing

We’ve worked across several transactions to raise capital
for the club to, they call it a remodeling project, but it’s
essentially going to be a new stadium by the time that they’re
done. So those are two of the more high-profile stadium
transactions that we’ve worked on together in recent years. But
as you mentioned, we have worked with clients across all the major
league, most recently in Canada actually doing a financing at
Rogers Place for the Edmonton Oilers, worked recently with the
Pacers on their renovation of Gainbridge arena in Indianapolis,
with Austin FC providing the construction financing for Q2 Stadium
as well as many others.

Alan Hoffman: Great. No, that’s
impressive and it’s only the tip of the iceberg. I know
there’s 20, 30, 40 other transactions you could have
referenced. Zach, maybe for the folks listening, they probably know
what lawyers do. We push a lot of paper, nothing too exciting
there, but maybe you could explain the role of an investment banker
in a stadium financing and how you came to develop the expertise in
the area that you have.

Zach Effron: Sure. I would say building a
new stadium or arena is one of the biggest endeavors that our
clients undertake. We’re typically dealing with a generational
family that’s run a sports organization and building a stadium
or an arena just isn’t part of their day to day lives and
isn’t the same as competing to the highest level. And so these
projects are very complex and can take years to put together. And
in this space, we learn by doing, and the first stadium transaction
I worked on was in 2006 for Yankee’s Stadium. And what I love
about this job is that I continue to learn with every new deal that
I do. So we like to get involved early in the process and help our

And while I always say that no two deals are alike, there’s
a lot that we learn from each deal, and we like to use that
experience to help our clients. I guess while I’d say my role
is to originate structure and ultimately raise the financing for a
project, we really try to help our clients who may be doing
something like this for the very first time. A new stadium or arena
project is, it’s like starting a startup company with a massive
mix use construction development project, and so that’s a

So having someone who has been through that, through multiple
examples in different parts of the world is where we try to help
our clients. Our end job is to raise the capital, but we can get
involved years before that takes place because there’s so many
different elements to putting a transaction like this together,
which I know we’ll get to through our discussion here. But a
lot of decisions have to be made on the client side that ultimately
can impact the financing, and while that financing may be one or
two or three years down the road, we like to be there early as they
navigate the various issues that are required to put something like
this together.

Alan Hoffman: Right. And for folks who
maybe aren’t that familiar with a stadium financing, I used the
term non-recourse a little bit earlier. That’s often very
attractive to companies when they look to obtain financing. So
maybe you could just describe the basic premise of a stadium or
arena financing and what non-recourse structures tend to look

Zach Effron: Sure. And so maybe just to
take a step back to how teams are typically financing themselves
when they’re in their existing stadium arena or before
they’re looking at a new stadium project. Through our private
bank here at J.P. Morgan, we finance teams directly where it is a
recourse financing typically where we’re secured by the
franchise value itself, but often there is an element of owner
recourse for those transactions. And then the leagues raise
financing through their national media contracts and then can use
those to provide efficient loans to their teams directly. But when
taking on a new stadium or arena project, it is its own animal,
something that is often very unique to the folks looking at the

So, the way we typically structure them is in order to achieve
long term non-recourse financing, we start by forming a stadium
company, stadium companies, a bankruptcy, remote special purpose
entity that’s a sister entity to the company and we structure
pursuant to project finance rating criteria to achieve an
investment grade rating. The stadium company will essentially be
the owner or the landlord to the team and lease the stadium to the
team and collect revenues generated by the stadium which we use to
secure the stadium financing. We typically start in the bait
market, which is a more flexible place to handle potential
construction risk or cost overruns or delays, and also the proforma
revenue ramp up that any stadium or arena needs to experience.

Then, once we have the stadium built and contracted on the
revenue side, we typically refinance the bank loan into the
long-term U.S. private placement market to de-risk the project.
However, we do have clients that are comfortable with the interest
rate risk and prefer to remain in the bank market. In those
instances, we keep the project on our balance sheet.

Alan Hoffman: Okay. And I guess when we
talk about non-recourse, we of course don’t have the credit of
the club or even the arena code or the stadium code behind it.
It’s a revenue based type of financing. And I know from going
to concerts or sporting events, there’s a lot of different
revenue streams when you either look to buy merchandise or look
around at some of the sponsorships around the stadium. What are the
typical kinds of revenue streams that you would monetize as part of
a stadium financing?

Zach Effron: It gets back to putting a
structure in place that can achieve an investment grade rating. And
so in order to do that, we’re looking to monetize the long term
stable cash flows that are under contract at a stadium and arena.
And so these would be things like the naming rights contract, as we
have all seen just the demand for naming rights as an asset
continues to grow and the numbers that clubs are able to generate
just becomes ever larger in the current market. So naming rights,
building sponsorships, and that can be things like the name of your
club or your gate or various signage throughout the stadium and the
arena, and then premium seating. And so with those three, you have
naming rights contract that can be 20 years sponsorship, that can
be five or 10 plus years. And then premium seating, typically
staggered three, five, seven, gives us a solid robust revenue

We also include revenues that aren’t under contract and are
a little more dependent day of game type revenues like food and
beverage, merchandise, and revenues generated from other events
such as concerts. But it’s a mousetrap that we’ve used a
well-worn path for many years and many examples and works well with
our credit risk team here at J.P. Morgan, as we look to take more
and more of these on balance sheet, but also with the long-term
private placement buyers. There’s just a long track record of
these revenues being paid remaining online, resetting at higher and
higher levels. So they provide a comfortable financing

Alan Hoffman: So when my kids want a $50
Justin Bieber t-shirt, that could also go into the revenue

Zach Effron: Yeah, absolutely. Merchandise
is often included.

Alan Hoffman: When you and I started in
this business, and then you referenced the Yankee’s Stadium
financing, which was almost 20 years ago, government entities,
municipalities had a fairly significant role in stadium finance.
There’s been less of that over the last decade for various
reasons. Maybe Zach, speak to how the role of the local city
government has changed in recent years.

Zach Effron: In almost every instance,
they’re still going to be a role for the local government, just
because it’s hard for these not to be community assets, just
given what we’re dealing with where you’ve had a team be
part of a local city or area for decades and the generational
element that these teams have. So even if you’re going a
hundred percent private, there’s still always dealings with the
local government. What it really gets down to is public subsidy and
whether or not that’s going to be part of the financing
solution or not. And so I think it really starts with a discussion
of how the value of live content has grown over the past several
decades. If you look at both team valuations and sports media
contracts, it’s just been up into the right through the entire

I think this strong growth in value coupled either with
challenged municipal budgets or quite simply political environment
that’s less conducive to public funding for professional sports
venues has led to buildings being more and more privately financed
as the market can support it. We talked about SoFi Stadium, so one
of the strongest media markets in the world with two NFL
franchises, and that was financed on a hundred percent private
basis and that’s the largest stadium ever built. So that’s
astounding where several decades ago, these buildings may have been
a hundred percent publicly financed. Now, the largest one
that’s out there has been a hundred percent privately financed.
And we talked about Q2 Stadium and Austin FC, that was also a
hundred percent privately financed. I think that was a function of
getting a deal done in Austin.

What speaks to me is every market is different, every situation
is different. And so that’s back to what is our role in these
financings, knowing who the parties are around the table and
what’s important to them and how other deals have gotten done,
because there’s certainly remain markets where public funding
is required to make the numbers work. I think the Buffalo Bills is
the most recent example of this, where you have the State of New
York and Erie County looking to provide a very large public
contribution in order to keep the Bills in Buffalo. I think
that’s just the facts and circumstances that that’s
what’s required to make that deal work.

Another example that we’re talking about is Las Vegas, where
Las Vegas is a very attractive market, but as a local government,
they’ve actually been very opportunistic and strategically
using the hotel tax to attract professional sports. With the
Raiders moving to Vegas with Allegiant Stadium, which just drives
more hotel tax, it makes a lot of sense in that instance. I think
when it comes to public versus private partnerships, every
situation is unique, but there’s a lot of different incentives
that may be offered to make the deal work. Alan, you mentioned the
Yankee’s Stadium, Yankee City in Barclays were all done as
pilot structures where the team is paying for the building.
They’re just doing it through a property tax that wouldn’t
have otherwise be charged. So, just another example of how local
governments can get creative.

The big answer to the question is that getting public funding is
a lot more challenging than it used to be, but there’s a lot of
ways to get creative with your local governmental counterparts and
things that they can deliver, whether it’s through a ground
lease or incremental taxes that they don’t have now that would
only be generated by the project so that a negotiation can be

Alan Hoffman: Yeah, and what’s
interesting in Austin and what you mentioned that there’s a
city that was desperate for sports. They didn’t have any
professional sports team and yet we were able to do that deal for
an expansion MLS franchise without any funding from the city, even
though they were very excited about the project and very
supportive, but we got it done with all private financing.

Zach Effron: Look, I think given
Austin’s a very special place, given where we were, it was
pretty much known from the start that through public subsidiaries
of the project weren’t going to be on the table, but there were
other things and other incentives that were provided that enabled
that project to get done. And then it’s the market, Austin,
Nashville, places like that around the country where the
market’s so strong and growing, they can support a hundred
percent privately financed.

Alan Hoffman: Right. So when we do these
deals, whether it’s MLS, Major League Baseball, whatever it is,
the league governing body plays a major role. They may not be
directly involved in the financing, but they provide at the very
least regulatory oversight and get involved in those transactions.
You want to maybe describe what role the league typically

Zach Effron: I think big picture part of
the league’s job when it comes to financing is to ensure that
all of its teams have the most efficient access to capital.
There’s certain guardrails that they put in place to ensure
that this is maintained. So your leagues have debt limits and
they’re different across all the leagues, just to ensure that
none of the teams get over levered. And then when you’re
looking to build a new stadium or arena and all the leagues are
different, but you look at the NFL or NBA for example, they
actually waive the debt limit and allow the team to take on
additional debt, but they consent to it. And through their consent
letter, they have step in rights, which are all various things that
ultimately protect lenders and investors in these projects.

So, I think that the oversight that the leagues provide here in
the U.S. is very important and gives a lot of comfort to whether
it’s an institution like J.P. Morgan or a life insurance
company buying the refinance of a bank loan that the league is
there to support these projects in multiple ways. In some
instances, they’ll lend money to the projects on a subordinate
basis, in other instances, they are keenly aware of their debt
rules and whether or not their clubs are in compliance with them,
but also providing their clubs the flexibility to go beyond the
debt rules to invest in something like a new stadium. I think the
leagues see the value and want to help their teams find ways to
continue to invest in things like stadiums. MLS is an excellent
example of that, where basically the cost proceed at the table is
to have your own MLS stadium, and that’s something that that
league’s been very passionate and direct about, but it’s
worked very, very well for the product and how the product looks on

NFL with a SoFi being one of the most recent examples, just
making sure that that league continues to be state of the art and
cutting edge. It’s very interesting, once one team builds a new
stadium, everyone else sees how much additional revenue that
they’re able to generate. Therefore, they see the need to
invest in order to grow the business. The leagues are very helpful
in these financings, whether it’s the debt rules that they
have, the oversight that they provide, but also just having a big
voice in the room, even if indirectly, it just gives people

Alan Hoffman: Right. One of the most
exciting things I’ve noticed over the last couple years is how
we’ve been able to take the technology of stadium financing
that we’ve deployed in the United States and bring it over to
other countries. So you’re seeing now and Real Madrid is just
one example, teams, clubs in other countries, in other leagues
availing itself of these innovative financing structures and maybe
you want to just touch on that a bit.

Zach Effron: Yeah, absolutely. Here in
North America, we’ve been in a bit of a say a 20-year cycle
where it’s almost required to remain competitive that your
stadium is either rebuilt or upgraded in a significant way. And so
I’ve been fortunate enough to see a couple cycles of that here
in North America. But in Europe it’s been different in that you
have some of the biggest sports franchises in the world playing in
stadiums that are in some cases very old. And I think what has
started to happen is maybe in simplistic terms, how can you
increase revenue for a European football? You can look to invest in
the player squad and win more games, and there’s some investors
out there taking that approach. The media side is managed by the
leagues itself, but building a new stadium can be a complete game
changer for these European football franchises where, especially if
they have a very solid fan base.

A lot of them have a large international media presence through
social media and just looking to further increase value of the
franchise and really stay competitive as they look for ways to
increase revenue to stay competitive on the pitch. Also, investing
in the stadium is a way to generate revenue that currently
can’t be tapped with the existing building. So, when it comes
to technology, we have brought the same boxes and arrows and mouse
traps that we use here in the U.S. where we’re looking to,
again raise the most amount of long-term money as possible.
Creating a saving company and putting financial revenue streams
like naming rights and sponsorship and premium seating that we were
talking about earlier is where we’re starting in Europe, and
we’ve been at this for quite a while now.

I think you have to remain flexible in terms of structure. You
don’t have the leagues in Europe the way you do in the U.S.
providing the same sort of rules or oversight or protection so just
bring the exact same structure and try to overlay it. Every
situation is different, and depending on some of the facts and
circumstances and nuances, the financings we’ve done in Europe
are all bespoke and all unique in one way or another. But I think
the bottom line is there’s tremendous amounts of demand on the
investor side, whether it’s the bank market or the
institutional investor to get invested with these clubs.

If a new stadium is part of the investment thesis and from the
investor side or underwriting side, we can check all the boxes that
we’ve got strong management on the construction side, we have a
strong contractor and development team with an architect and the
like, and then solid thought has been put into the business plan
and the proformas, it’s turning out to be a market that is for
certain clubs even more efficient than what we’re able to do
here in the U.S. For a lot of clubs, not quite the same, but we are
finding strong demand for these stadium projects around Europe.

I think it’s because it just makes sense to a lot of people.
You’ve got this franchise that’s been around for a hundred
years with this huge fan base playing in this building, that’s
50 years old and you go walk around in it and you almost can’t
believe it when you compare it to the stadiums that appear in the
U.S. When the European teams see the amount of revenue the U.S.
teams are able to drive out of their stadium, the light bulb goes
off on their side as well.

Alan Hoffman: Thanks, Zach. Really appreciate you joining me
today. Thanks to everyone who’s been listening to our Let’s
Talk Lending podcast. I’ll remind you that you can subscribe to
the podcast via Apple iTunes, or Google, or by visiting the Winston
& Strawn website where we provide insights on various topics
and the latest market updates and trends in all areas of finance. I
hope you enjoy today’s podcast, but at the same time, I
don’t think David Letterman has anything to worry about. But
thanks for joining, talk to you soon.

Zach Effron: Great. Thank you so much.
Thanks, Alan, thanks everyone at Winston & Strawn.

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